Order-Routine Specification

After selecting suppliers, the buyer negotiates the final order, listing the technical specifications, the quantity needed, the delivery time, warranties, and so on. For maintenance, repair, and operating items, buyers are moving toward blanket contracts under which the supplier promises to resupply the buyer as needed, at agreed-upon prices, over a specified period. Because the seller holds the stock, blanket contracts are sometimes called stockless purchase plans. These long-term relationships make it difficult for out-suppliers to break in unless the buyer becomes dissatisfied.

Companies that fear a shortage of key materials are willing to buy and hold large inventories. They will sign long-term contracts with suppliers to ensure a steady flow of materials. Some companies go further and shift the ordering responsibility to their suppliers, using systems called vendor-managed inventory. These suppliers are privy to the customer’s inventory levels and take responsibility for continuous replenishment programs.

Performance Review

The business buyer periodically reviews the performance of the chosen supplier(s) using one of three methods. The buyer may contact end users and ask for their evaluations, rate the supplier on several criteria using a weighted-score method, or aggregate the cost of poor performance to come up with adjusted costs of purchase, including price. This performance review may lead the buyer to continue, modify, or end a supplier relationship.

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